Joining a startup as employee no2

#1

Post by millarh3 » Fri, Aug 10, 2018, 12:47 PM UTC

I’m being offered a position in a startup. It’s a branch off an existing pre-series A, post angel round startup. The parent startup is creating a new entity in a different country. Their current product is to be modified and introduced in another market, with a different pricing model. Essentially creating a new startup.

The offer is for me to join the new startup as employee no2 (essentially a cofounder). This isn’t exactly a blank slate as the parent company will have some ownership roughly 20% and will be covering some initial costs. The offer consists of me taking a low salary. I also get 5% equity in the new startup + a further 5% conditional to us reaching 1k business users in the first 12 months.

Is this a reasonable offer for me to take given the circumstances?

Re: Joining a startup as employee no2

#2

Post by MrEfficiency » Fri, Aug 10, 2018, 12:52 PM UTC

> The offer consists of me taking a low salary.

>Is this a reasonable offer for me to take given the circumstances?

Missing a necessary piece of data. 40k is different than 90k.

Re: Joining a startup as employee no2

#3

Post by jacquesm » Fri, Aug 10, 2018, 12:55 PM UTC

The 5% conditional doesn't make sense to me. After all, if it doesn't work out that 5% is worth next to nothing so they might as well gift it to you in that case.

As far as a 'low salary' is concerned, unless you have inside info as to why that stock should be worth the gap between a normal salary and a low one I'd value the equity at roughly $1.

Re: Joining a startup as employee no2

#4

Post by millarh3 » Fri, Aug 10, 2018, 1:02 PM UTC

MrEfficiency wrote: post #2

> The offer consists of me taking a low salary. >Is this a reasonable offer for me to take given the circumstances? Missing a necessary piece of data. 40k is different than 90k.

Well interestingly they couldn’t specify upfront and wanted to know whether equity wise, the structure made sense. If yes, the salary could be negotiated. However from what it sounded like, they were looking to keep the salary level at enough to just cover the basic expenses.

Re: Joining a startup as employee no2

#5

Post by MrEfficiency » Fri, Aug 10, 2018, 2:02 PM UTC

millarh3 wrote: post #4

MrEfficiency wrote: post #2

> The offer consists of me taking a low salary. >Is this a reasonable offer for me to take given the circumstances? Missing a necessary piece of data. 40k is different than 90k.

Well interestingly they couldn’t specify upfront and wanted to know whether equity wise, the structure made sense. If yes, the salary could be negotiated. However from what it sounded like, they were looking to keep the salary level at enough to just cover the basic expenses.

This is a red flag.

Re: Joining a startup as employee no2

#6

Post by Eridrus » Fri, Aug 10, 2018, 3:04 PM UTC

It's a pretty good chunk of equity, but....

1k business users in 12 months seems pretty difficult - besides a good product you'll need marketing $$ or sales people to get you there - are they giving you any capital to get there?

You said they would be covering "initial expenses", but this sounds like you need to get your expenditures approved by the parent company, which seems not great.

If you're a technical person, this equity setup seems weird since you only have pretty indirect control of how well you can sell the product.

Given you're branching off from an existing startup and I assume taking their source code, will they be providing engineering support to help get people up to speed on the codebase, is there any expectation they will be kept in sync, will the new entity owe any royalties?

In the end, I think the question is: do you think the product/company is good? 5% of a great company is great, 5% of a shitty company is shitty. It sounds like the parent company basically doesn't know if this will work out or not and doesn't know the target country well, so it hoping you do.